Serbia’s economy strengthened during the first half of 2026, but the expansion has been uneven across sectors, with construction and services advancing while overall industrial output remained almost unchanged. Gross domestic product grew 3.8% year on year in the second quarter, marking faster growth than at the beginning of the year. Construction expanded by 9.1%, while professional, scientific, technical and administrative activities increased 5.8%, reinforcing the role of services and investment-related activity in economic growth.
The National Bank of Serbia (NBS) has raised its 2026 growth forecast to 3.2% and continues to project 4.5% growth in 2027. Expo-related expenditure and services are expected to provide additional support next year. The IMF has a more cautious outlook, forecasting growth of 2.8% in 2026 and 4.0% in 2027.
Industrial production shows weaker momentum
Industrial activity has provided a significantly weaker signal than the broader economy. Industrial production increased only 0.3% in January-July, while July output fell 2.3% year on year. Manufacturing production declined 1.6% in July, and electricity, gas and steam production dropped 8.8%.
Mining was an exception, with output increasing 3.0% in July. The contrasting sectoral performance points to a changing composition of economic activity, with growth concentrated more heavily in services, construction, investment and selected export-oriented industries rather than being broadly based across traditional industrial production.
Investment and exports support selected sectors
Production of capital goods recorded strong growth during the first seven months, while automotive exports increased sharply. Mining also remains an important source of external earnings, alongside continued expansion in construction. At the same time, weaker energy production and subdued activity in parts of consumer-oriented manufacturing have limited the increase in aggregate industrial output. The resulting structure combines expanding investment, infrastructure, export manufacturing and services with relatively flat physical industrial production overall.
Inflation and interest rates shape the business environment
Inflation remained comparatively contained, with consumer prices 2.2% higher year on year in August. The NBS left its policy rate unchanged at 5.75% in September, while maintaining a cautious stance. The central bank expects base effects and international commodity prices to contribute to renewed upward pressure on inflation.
For businesses, the uneven expansion creates different conditions across sectors. Engineering, construction, automotive suppliers, mining contractors, business services, financial services and technology providers are more closely linked to areas currently recording stronger activity. Energy-intensive and lower-value manufacturing, meanwhile, faces pressures related to labour, electricity, financing and demand from European markets.
2027 growth depends on the composition of expansion
The performance of the Serbian economy in 2027 will therefore depend not only on the pace of overall GDP growth, but also on the extent to which expansion is reflected in productivity, exports and private industrial investment. The combination of infrastructure expenditure and consumption demand will remain relevant as Serbia approaches Expo 2027, while the distribution of investment and industrial activity will determine how the current growth cycle develops.
